At the beginning of a Canadian winter, spring 2018 seems awfully far away. Hockey, skiing and curling have not yet yielded to thoughts of golfing, cycling, hiking and… annual general meetings (“AGMs”).
While some issuers are already into the process of at least preparing their thoughts on what governance-related matters need to be addressed at their AGMs, most are more occupied with year-end operational matters, budgeting and preparing for auditors. Although the C-Suite and board members intuitively recognize the importance of effective governance and are happy to insert state-of-the-art boiler plate into their collateral, surprisingly few actuate that into a value-added, introspective exercise that makes the organization really better.
Board independence and diversity, executive compensation, director overboarding, corporate social responsibility and a number of other elements are up for scrutiny not only by shareholders, but by other stakeholders who have the ability to impact an issuer’s business. While the optimal scenario would have seen a company adopt a proactive approach to ensuring effective governance, internal human resources are often not available to champion and discharge that function, particularly in the small and mid-cap spaces. The best result is that the issuer ends up with benign governance that does nothing to increase value for stakeholders. The worst result is that an issuer is left with the defensive (or even mortal) wounds of having ignored a critical component of their corporate health and is then required to take valuable time away from profitably growing the business and instead spend it on damage control and healing.
The good news is that it’s never too late for some governance introspection. Investing time before that information circular goes out (and building some messaging around a potentially contentious proposal) can make all the difference.
-Steve Cloutier, Senior Advisor